United Insurance Holdings Corp. Reports
Financial Results for Its Second Quarter Ended June 30, 2018

Company to Host Quarterly Conference Call at 5:00 P.M. ET on
August 1, 2018

August 01, 2018 04:01 PM Eastern Daylight Time

ST. PETERSBURG, Fla.--(BUSINESS WIRE)--United Insurance Holdings Corp. (Nasdaq: UIHC)(UPC Insurance or
the Company), a property and casualty insurance holding company, today
reported its financial results for the second quarter ended June 30,
2018.

($ in thousands, except for per share data)

Three Months Ended

Six Months Ended

June 30,

June 30

2018

2017

Change

2018

2017

Change

Gross premiums written

$

384,662

$

352,347

9.2

%

$

664,279

$

521,189

27.5

%

Gross premiums earned

$

289,641

$

261,584

10.7

%

$

568,591

$

443,649

28.2

%

Net premiums earned

$

171,306

$

159,618

7.3

%

$

336,206

$

266,801

26.0

%

Total revenues

$

183,148

$

178,073

2.8

%

$

355,201

$

300,706

18.1

%

Earnings before income tax

$

19,332

$

12,650

52.8

%

$

31,047

$

18,588

67.0

%

Net income

$

14,701

$

7,257

102.6

%

$

23,069

$

11,156

106.8

%

Net income per diluted share

$

0.34

$

0.17

100.0

%

$

0.54

$

0.35

54.3

%

Reconciliation of net income to core income:

Plus: Merger expenses

$

—

$

6,743

(100.0

)%

$

—

$

6,894

(100.0

)%

Plus: Non-cash amortization of intangible assets

$

1,972

$

11,395

(82.7

)%

$

12,386

$

13,189

(6.1

)%

Less: Realized losses on investment portfolio

$

(438

)

$

(132

)

231.8

%

$

(227

)

$

(483

)

53.0

%

Less: Unrealized gains (losses) on equity securities

$

1,381

$

—

100.0

%

$

(1,063

)

$

—

(100.0

)%

Less: Net tax impact(1)

$

257

$

6,395

(96.0

)%

$

3,419

$

7,198

(52.5

)%

Core income(2)

$

15,473

$

19,133

(19.1

)%

$

33,326

$

24,524

35.9

%

Core income per diluted share(2)

$

0.36

$

0.46

(21.7

)%

$

0.78

$

0.77

1.3

%

Book value per share

$

12.72

$

12.39

2.7

%

(1)

In order to reconcile net income to the core income measure, we
included the tax impact of all adjustments using the effective rate
at the end of each period.

(2)

Core income and core income per diluted share, measures that are not
based on GAAP, are reconciled above to net income and net income per
diluted share, respectively, the most directly comparable GAAP
measures. Additional information regarding non-GAAP financial
measures presented in this press release can be found in the
"Definitions of Non-GAAP Measures" section, below.

"This was a solid quarter for UPC," said John Forney, President & CEO of
UPC Insurance. "We continued to show strong and balanced organic growth
across our geographic footprint, and produced record levels of written
and earned premium for the quarter. On the loss side, despite retaining
over $17 million of catastrophe losses, we posted our best Q2 earnings
performance ever, and the second best earnings of any quarter in company
history, behind only last year's Q4, when we retained only $1.3 million
in catastrophe losses. I'm proud of the progress we are making, and
excited for the rest of the year."

Return on Equity and Core Return on Equity

Return on equity is a ratio the Company calculates by dividing
annualized net income for the trailing three months by the average
stockholders' equity for the trailing twelve months. Core return on
equity (see calculation below) is a ratio calculated using non-GAAP
measures. It is calculated by dividing the annualized core income for
the trailing three months by the average stockholders’ equity for the
trailing twelve months. Core income is an after-tax non-GAAP measure
that is calculated by excluding from net income the effect of non-cash
amortization of intangible assets, unrealized gains or losses on the
Company's equity security investments and realized gains or losses on
the Company's investment portfolio. In the opinion of the Company’s
management, core income, core income per share and core return on equity
are meaningful indicators to investors of the Company's underwriting and
operating results, since the excluded items are not necessarily
indicative of operating trends. Internally, the Company’s management
uses core income, core income per share and core return on equity to
evaluate performance against historical results and establish financial
targets on a consolidated basis. The table above reconciles core income
to net income, the most directly comparable GAAP measure.

($ in thousands)

Three Months Ended

Six Months Ended

June 30,

June 30,

2018

2017

2018

2017

Net income

$

14,701

$

7,257

$

23,069

$

11,156

Return on equity based on GAAP net income (loss) (1)

11.1

%

9.1

%

8.7

%

7.0

%

Core income

$

15,473

$

19,133

$

33,326

$

24,524

Core return on equity (1)

11.7

%

24.1

%

12.4

%

15.4

%

(1)

Return on equity for the three and six months ended June 30, 2018
and 2017 is calculated on an annualized basis.

Combined Ratio and Underlying Ratio

The calculations of the Company's combined ratio and underlying combined
ratio are shown below.

Expense ratio, net is calculated as the sum of all operating
expenses less interest expense relative to net premiums earned.

(3)

Combined ratio is the sum of the loss ratio, net and expense ratio,
net.

(4)

For the six months ended June 30, 2018, the Company presented $20.7
million of ceding commissions earned as a $4.5 million decrease to
ceded earned premium and a $16.2 million decrease in policy
acquisition costs, which reduced other revenue and removed the
distortive impact to our underlying combined ratio. For the three
months ended June 30, 2018, the Company presented $10.4 million of
ceding commissions earned as a $2.3 million decrease to ceded earned
premium and an $8.1 million decrease in policy acquisition costs.

(5)

Underlying combined ratio, a measure that is not based on GAAP, is
reconciled above to the combined ratio, the most directly comparable
GAAP measure. Additional information regarding non-GAAP financial
measures presented in this press release can be found in the
"Definitions of Non-GAAP Measures" section, below.

Quarterly Financial Results

Net income for the second quarter of 2018 was $14.7 million, or $0.34
per diluted share, compared to net income of $7.3 million, or $0.17 per
diluted share, for the second quarter of 2017. The increase in net
income was primarily due to the increase in gross premiums earned and
the decrease in amortization and merger expenses during the second
quarter of 2018 compared to the second quarter of 2017.

The Company's total gross written premium increased by $32.3 million, or
9.2%, to $384.7 million for the second quarter of 2018 from $352.3
million for the second quarter of 2017, primarily reflecting organic
growth in new and renewal business generated in all regions. The
breakdown of the quarter-over-quarter changes in both direct written and
assumed premiums by region and gross written premium by line of business
are shown in the table below.

($ in thousands)

Three Months EndedJune 30,

2018

2017

Change $

Change %

Direct Written and Assumed Premium by Region (1)

Florida

$

204,885

$

199,736

$

5,149

2.6

%

Gulf

59,022

56,622

2,400

4.2

Northeast

47,346

40,842

6,504

15.9

Southeast

28,433

25,088

3,345

13.3

Total direct written premium by region

339,686

322,288

17,398

5.4

%

Assumed premium (2)

44,976

30,059

14,917

49.6

Total gross written premium by region

$

384,662

$

352,347

$

32,315

9.2

%

Gross Written Premium by Line of Business

Personal property

$

256,910

$

235,132

$

21,778

9.3

%

Commercial property

127,752

117,215

10,537

9.0

Total gross written premium by line of business

$

384,662

$

352,347

$

32,315

9.2

%

(1)

"Gulf" is comprised of Hawaii, Louisiana and Texas; "Northeast" is
comprised of Connecticut, Massachusetts, New Jersey, New York and
Rhode Island; and "Southeast" is comprised of Georgia, North
Carolina and South Carolina.

(2)

Assumed premium written for 2018 is primarily commercial property
business assumed from unaffiliated insurers.

Loss and LAE increased by $1.7 million, or 1.9%, to $88.6 million for
the second quarter of 2018 from $86.9 million for the second quarter of
2017. Loss and LAE expense as a percentage of net earned premiums
decreased 2.8 points to 51.7% for the second quarter of 2018, compared
to 54.5% for the same period last year. Excluding catastrophe losses and
reserve development, the Company's gross underlying loss and LAE ratio
for the second quarter of 2018 would have been 24.9%, a decrease of 0.5
points from 25.4% during the second quarter of 2017.

Policy acquisition costs increased by $7.1 million, or 16.5%, to $50.5
million for the second quarter of 2018 from $43.3 million for the second
quarter of 2017. The primary driver of the increase in costs was the
managing general agent fees related to AmCo commercial premiums along
with agent commissions which were generally consistent with the
Company's growth in premium production and higher average market
commission rates outside of Florida.

Operating and underwriting expenses increased by $3.4 million, or 54.7%,
to $9.7 million for the second quarter of 2018 from $6.3 million for the
second quarter of 2017, primarily due to increased costs related to
incurred expenses for software tools and agent incentive costs.

General and administrative expenses decreased by $(15.5) million, or
(55.1)%, to $12.6 million for the second quarter of 2018 from $28.2
million for the second quarter of 2017, primarily due to amortization
costs related to the merger with AmCo during the second quarter of 2017
that were fully expensed at the end of the first quarter of 2018 as well
as merger expenses that were incurred during the second quarter of 2017.

Combined Ratio Analysis

The calculations of the Company's loss ratios and underlying loss ratios
are shown below.

($ in thousands)

Three Months Ended

Six Months Ended

June 30,

June 30,

2018

2017

Change

2018

2017

Change

Loss and LAE

$

88,595

$

86,938

$

1,657

$

165,841

$

150,271

$

15,570

% of Gross earned premiums

30.6

%

33.2

%

(2.6

) pts

29.2

%

33.9

%

(4.7

) pts

% of Net earned premiums

51.7

%

54.5

%

(2.8

) pts

49.3

%

56.3

%

(7.0

) pts

Less:

Current year catastrophe losses

$

17,340

$

21,798

$

(4,458

)

$

23,657

$

32,410

$

(8,753

)

Prior year reserve unfavorable (favorable) development

(870

)

(1,264

)

394

(1,551

)

(1,790

)

239

Underlying loss and LAE (1)

$

72,125

$

66,404

$

5,721

$

143,735

$

119,651

$

24,084

% of Gross earned premiums

24.9

%

25.4

%

(0.5

) pts

25.3

%

27.0

%

(1.7

) pts

% of Net earned premiums

42.1

%

41.6

%

0.5

pts

42.8

%

44.8

%

(2.0

) pts

(1)

Underlying loss and LAE is a non-GAAP financial measure and is
reconciled above to net loss and LAE, the most directly comparable
GAAP measure. Additional information regarding non-GAAP financial
measures presented in this press release can be found in the
"Definitions of Non-GAAP Measures" section, below.

The calculations of the Company's expense ratio and underlying expense
ratios are shown below.

($ in thousands)

Three Months Ended

Six Months Ended

June 30,

June 30,

2018

2017

Change

2018

2017

Change

Policy acquisition costs

$

50,454

$

43,320

$

7,134

$

99,516

$

78,756

$

20,760

Operating and underwriting

9,682

6,257

3,425

18,000

12,129

5,871

General and administrative

12,643

28,176

(15,533

)

35,968

39,509

(3,541

)

Total Operating Expenses

$

72,779

$

77,753

$

(4,974

)

$

153,484

$

130,394

$

23,090

% of Gross earned premiums

25.1

%

29.7

%

(4.6

) pts

27.0

%

29.4

%

(2.4

) pts

% of Net earned premiums

42.5

%

48.7

%

(6.2

) pts

45.7

%

48.9

%

(3.2

) pts

Less:

Ceding commission income (1)

$

—

$

10,562

$

(10,562

)

$

—

$

20,094

$

(20,094

)

Underlying expense (2)

$

72,779

$

67,191

$

5,588

$

153,484

$

110,300

$

43,184

% of Gross earned premiums

25.1

%

25.7

%

(0.6

) pts

27.0

%

24.9

%

2.1

pts

% of Net earned premiums

42.5

%

42.1

%

0.4

pts

45.7

%

41.5

%

4.2

pts

(1)

For the six months ended June 30, 2018, the Company presented $20.7
million of ceding commissions earned as a $4.5 million decrease to
ceded earned premium and a $16.2 million decrease in policy
acquisition costs, which reduced other revenue and removed the
distortive impact to our underlying expense ratio. For the three
months ended June 30, 2018, the Company presented $10.4 million of
ceding commissions earned as a $2.3 million decrease to ceded earned
premium and an $8.1 million decrease in policy acquisition costs.

(2)

Underlying expense is a non-GAAP financial measure and is reconciled
above to total operating expenses, the most directly comparable GAAP
measure. Additional information regarding non-GAAP financial
measures presented in this press release can be found in the
"Definitions of Non-GAAP Measures" section, below.

Reinsurance Costs as a % of Earned Premium

Excluding the Company's business for which it cedes 100% of the risk of
loss, reinsurance costs in the second quarter of 2018 were 38.8% of
gross premiums earned, compared to 37.1% of gross premiums earned for
the second quarter of 2017. The increase in this ratio was driven
primarily by the increased coverage purchased for our 2018-19 combined
catastrophe reinsurance program.

Investment Portfolio Highlights

The Company's cash and investment holdings increased to $1.2 billion at
June 30, 2018 compared to $1.1 billion at December 31, 2017. UPC
Insurance's cash and investment holdings consist of investments in U.S.
government and agency securities, corporate debt and 100% investment
grade money market instruments. Fixed maturities represented
approximately 90.3% of total investments at June 30, 2018 compared to
89.3% at December 31, 2017. At June 30, 2018 the modified duration was
3.8 years compared to 3.9 years at December 31, 2017.

Book Value Analysis

Book value per share increased 1.3% from $12.56 at December 31, 2017 to
$12.72 at June 30, 2018, and underlying book value per share increased
5.2% from $12.35 at December 31, 2017 to $12.99 at June 30, 2018. An
increase in the Company's retained earnings drove the increase in our
book value per share. Removing the effect of the decrease in accumulated
other comprehensive income, as shown in the table below, also impacted
our underlying book value per share.

($ in thousands, except for per share data)

June 30,

December 31,

2018

2017

Book Value per Share

Numerator:

Common stockholders' equity

$

544,734

$

537,125

Denominator:

Total Shares Outstanding

42,822,187

42,753,054

Book Value Per Common Share

$

12.72

$

12.56

Book Value per Share, Excluding the Impact of Accumulated Other
Comprehensive Income (AOCI)

Numerator:

Common stockholders' equity

$

544,734

$

537,125

Accumulated other comprehensive income

(11,493

)

9,221

Stockholders' Equity, excluding AOCI

$

556,227

$

527,904

Denominator:

Total Shares Outstanding

42,822,187

42,753,054

Underlying Book Value Per Common Share(1)

$

12.99

$

12.35

(1)

Underlying book value per common share is a non-GAAP financial
measure and is reconciled above to book value per common share, the
most directly comparable GAAP measure. Additional information
regarding non-GAAP financial measures presented in this press
release can be found in the "Definitions of Non-GAAP Measures"
section, below.

Definitions of Non-GAAP Measures

We believe that investors' understanding of UPC Insurance's performance
is enhanced by our disclosure of the following non-GAAP measures. Our
methods for calculating these measures may differ from those used by
other companies and therefore comparability may be limited.

Combined ratio excluding the effects of current year catastrophe
losses, prior year reserve development and ceding commission income
earned (underlying combined ratio) is a non-GAAP ratio, which is
computed by subtracting the effect of current year catastrophe losses,
prior year development, and ceding commission income earned related to
the Company's quota share reinsurance agreement from the combined ratio.
The Company believes that this ratio is useful to investors and it is
used by management to reveal the trends in the Company's business that
may be obscured by current year catastrophe losses, losses from lines in
run-off, prior year development, and ceding commission income earned.
Current year catastrophe losses cause the Company's loss trends to vary
significantly between periods as a result of their incidence of
occurrence and magnitude, and can have a significant impact on the
combined ratio. Prior year development is caused by unexpected loss
development on historical reserves. Ceding commission income compensates
the Company for expenses it incurs in generating the premium ceded under
the Company's quota share reinsurance agreement. The Company believes it
is useful for investors to evaluate these components separately and in
the aggregate when reviewing the Company's performance. The most direct
comparable GAAP measure is the combined ratio. The underlying combined
ratio should not be considered as a substitute for the combined ratio
and does not reflect the overall profitability of the Company's business.

Net loss and LAE excluding the effects of current year catastrophe
losses and prior year reserve development (underlying loss and LAE)
is a non-GAAP measure which is computed by subtracting the effect of
current year catastrophe losses and prior year reserve development from
net loss and LAE. The Company uses underlying loss and LAE figures to
analyze the Company's loss trends that may be impacted by current year
catastrophe losses and prior year development on the Company's reserves.
As discussed previously, these two items can have a significant impact
on the Company's loss trends in a given period. The Company believes it
is useful for investors to evaluate these components separately and in
the aggregate when reviewing the Company's performance. The most direct
comparable GAAP measure is net loss and LAE. The underlying loss and LAE
measure should not be considered a substitute for net loss and LAE and
does not reflect the overall profitability of the Company's business.

Operating expenses excluding the effects of ceding commission income
earned, merger expenses, and amortization of intangible assets
(underlying expense) is a non-GAAP measure which is computed by
subtracting ceding income earned related to the Company's quota share
reinsurance agreement, merger expenses and amortization of intangibles.
Ceding commission income compensates the Company for expenses it incurs
in generating the premium ceded under the Company's quota share
reinsurance agreement. Merger expenses are directly related to past
mergers and are not reflective of current period operating performance.
Similarly, amortization expense is related to the amortization of
intangible assets acquired through mergers and therefore the expense
does not arise through normal operations. The Company believes it is
useful for investors to evaluate these components separately and in the
aggregate when reviewing the Company's performance. The most direct
comparable GAAP measure is operating expenses. The underlying expense
measure should not be considered a substitute for the expense ratio and
does not reflect the overall profitability of the Company's business.

Net Income excluding the effects of merger expenses, non-cash
amortization of intangible assets, realized gains (losses) and
unrealized gains (losses) on equity securities, net of tax (core income)
is a non-GAAP measure which is computed by adding merger expenses and
non-cash amortization, net of tax, to net income and subtracting
realized gains (losses) on our investment portfolio, net of tax, and
unrealized gains (losses) on our equity securities, net of tax, from net
income. Merger expenses relate to professional fees associated with the
AmCo merger in the second quarter of 2017. Amortization expense is
related to the amortization of intangible assets acquired through merger
and therefore the expense does not arise through normal operations.
Investment portfolio gains (losses) and unrealized equity security gains
(losses) vary independent of our operations. We believe it is useful for
investors to evaluate these components separately and in the aggregate
when reviewing our performance. The most direct comparable GAAP measure
is net income. The core income measure should not be considered a
substitute for net income and does not reflect the overall profitability
of our business.

Book value per common share, excluding the impact of accumulated
other comprehensive income (underlying book value per common share), is
a non-GAAP measure which is computed by dividing common stockholders'
equity after excluding accumulated other comprehensive income, by total
common shares outstanding plus dilutive potential common shares
outstanding. We use the trend in book value per common share, excluding
the impact of accumulated other comprehensive income, in conjunction
with book value per common share to identify and analyze the change in
net worth attributable to management efforts between periods. We believe
the non-GAAP measure is useful to investors because it eliminates the
effect of interest rates that can fluctuate significantly from period to
period and are generally driven by economic and financial factors which
are not influenced by management. Book value per common share is the
most directly comparable GAAP measure. Book value per common share,
excluding the impact of accumulated other comprehensive income, should
not be considered a substitute for book value per common share, and does
not reflect the recorded net worth of our business.

Founded in 1999, UPC Insurance is an insurance holding company that
sources, writes and services personal and commercial residential
property and casualty insurance policies using a group of wholly owned
insurance subsidiaries through a variety of distribution channels. The
Company currently writes policies in Connecticut, Florida, Georgia,
Hawaii, Louisiana, Massachusetts, New Jersey, New York, North Carolina,
Rhode Island, South Carolina and Texas, and is licensed to write in
Alabama, Delaware, Maryland, Mississippi, New Hampshire and Virginia.
From its headquarters in St. Petersburg, UPC Insurance's team of
dedicated professionals manages a completely integrated insurance
company, including sales, underwriting, customer service and claims. UPC
Insurance is a company committed to financial stability and solvency.

Forward-Looking Statements

Statements made in this press release, or on the conference call
identified above, and otherwise, that are not historical facts are
“forward-looking statements” that anticipate results based on our
estimates, assumptions and plans and are subject to uncertainty.These
statements are made subject to the safe-harbor provisions of the Private
Securities Litigation Reform Act of 1995. These forward-looking
statements do not relate strictly to historical or current facts and may
be identified by their use of words such as “may,” “will,” “expect,”
"endeavor," "project," “believe,” “anticipate,” “intend,” “could,”
“would,” “estimate” or “continue” or the negative variations thereof or
comparable terminology.We believe these statements are based on
reasonable estimates, assumptions and plans. However, if the estimates,
assumptions or plans underlying the forward-looking statements prove
inaccurate or if other risks or uncertainties arise, actual results
could differ materially from those communicated in these forward-looking
statements. Factors that could cause actual results to differ materially
from those expressed in, or implied by, the forward-looking statements
may be found in our filings with the U.S. Securities and Exchange
Commission, including the “Risk Factors” section in our most recent
Annual Report on Form 10-K and subsequent Quarterly Reports on Form
10-Q. Forward-looking statements speak only as of the date on which they
are made, and, except as required by applicable law, we undertake no
obligation to update or revise any forward-looking statement.

Consolidated Statements of Comprehensive Income

(unaudited)

In thousands, except share and per share amounts

Three Months Ended

Six Months Ended

June 30,

June 30,

2018

2017

2018

2017

REVENUE:

Gross premiums written

$

384,662

$

352,347

$

664,279

$

521,189

Change in gross unearned premiums

(95,021

)

(90,763

)

(95,688

)

(77,540

)

Gross premiums earned

289,641

261,584

568,591

443,649

Ceded premiums earned

(118,335

)

(101,966

)

(232,385

)

(176,848

)

Net premiums earned

171,306

159,618

336,206

266,801

Investment income

7,091

4,637

12,777

7,588

Net realized investment losses

(438

)

(132

)

(227

)

(483

)

Net unrealized gains (losses) on equity securities

1,381

—

(1,063

)

—

Other revenue

3,808

13,950

7,508

26,800

Total revenues

$

183,148

$

178,073

$

355,201

$

300,706

EXPENSES:

Losses and loss adjustment expenses

88,595

86,938

165,841

150,271

Policy acquisition costs

50,454

43,320

99,516

78,756

Operating expenses

9,682

6,257

18,000

12,129

General and administrative expenses

12,643

28,176

35,968

39,509

Interest expense

2,458

752

4,916

1,511

Total expenses

163,832

165,443

324,241

282,176

Income before other income

19,316

12,630

30,960

18,530

Other income

16

20

87

58

Income before income taxes

19,332

12,650

31,047

18,588

Provision for income taxes

4,631

5,393

7,978

7,432

Net income

$

14,701

$

7,257

$

23,069

$

11,156

OTHER COMPREHENSIVE INCOME:

Change in net unrealized gains (losses) on investments

(3,968

)

4,106

(27,352

)

7,837

Reclassification adjustment for net realized investment losses

438

132

227

483

Income tax benefit (expense) related to items of other comprehensive
income